Single family offices report private equity is outperforming their other assets

Three quarters of single family offices report that their direct investments are outperforming their other holdings, with a further 70% stating that their private equity fund investments are outperforming.

The research, by online private equity platform iCapital Network, found 62% of single family offices invest in private equity, with 70% allocated between 10 to 20% of their portfolio. A small group (8%) allocated more than 50% to private investments.

Earlier this year, The Global Family Office Report 2015 found private equity to be the best performing asset class in single family office portfolios, seeing returns of 15% in 2014.

“Single family offices have the autonomy to invest in the ways that best suit the underlying family and its long-term goals,” iCapital Network senior vice president and chief marketing officer Hannah Shaw Grove said.

“This can be seen in the relatively high allocations to private equity, which parallel the approach used by many large endowments to manage downside risk and increase return potential over extended periods of time.”

Nine out of 10 family offices invest in private equity through funds, while 40% are involved with direct investing, according to iCapital Network's research.

“In our view, the potential for superior investment returns is the single most influential factor in why private equity is viewed so favorably by single-family office investors these days,” said Lawrence Calcano, managing partner at iCapital Network. 

“And likely the potential opportunity to take more of a hands-on role in managing or supervising a direct investment also adds to the appeal – because in many cases, families can provide valuable insights and leadership drawn from their own experience as business leaders.”
Of the family offices already invested 57% plan to increase their allocation, while 30% of those not invested plan to make allocations in the next two years.

The research, conducted in conjunction with R A Prince & Associates, surveyed 162 single family offices with average assets of $918 million. More than half were from the US, with the remainder spread across Europe, Asia and Latin America.